Retail sales drop worse-than-expected 1.1% in July as rising Covid fears hit consumers

Shoppers in the U.S. cut back their purchases in July even more than expected as worries over the delta variant of Covid-19 dampened activity and government stimulus dried up.

Retail sales for the month fell 1.1%, worse than the Dow Jones estimate of a 0.3% decline.

Excluding automobiles, sales declined 0.4%, according to Commerce Department figures released Tuesday.

Markets showed little initial reaction to the news, with futures tied to the Dow Jones Industrial Average off more than 200 points and government bond yields lower across the board.

Consumers make up nearly 70% of all activity in the U.S., so retail sales are watched closely as a gauge to overall economic health.

Powered by a series of government stimulus checks, shoppers helped lift the economy out of the shortest recession in history, lasting just two months from the initial coronavirus fears in February 2020 until April, a month after fiscal and monetary authorities unleased a series of unprecedented programs to get the nation through the pandemic.

Though July saw a month-over-month decline, the $617.7 billion in sales still represented a 15.8% acceleration from the same time a year ago.

Most of the monthly decline came from motor vehicles and parts dealers, which fell 3.9%. The auto sector has been a major contributor to the inflation surge in 2021, with used car prices jumping higher amid swelling demand.

Clothing stores saw a 2.6% decline, and sporting goods, musical instrument and book stores fell 1.9%. Online sales also posted a 3.1% drop.

With energy prices continuing to rise, gasoline sales increased 2.4%, and the return of businesses to bars and restaurants pushed food and beverage sales up 1.7%. Eating and drinking establishments saw a 38.4% increase in sales from a year ago.

This is breaking news. Please check back for updates.

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